Morgan Stanley in-depth analysis: 172% Compound Annual Growth Rate, who can seize the CPO opportunity?

Recently, CPO (Co-Packaged Optics) has attracted much attention in the market. As a new type of optoelectronic integration technology, CPO connects the light engine and switching chip in close proximity, reducing the electrical interconnect length between the optical signal input and processing units. Its advantages include high bandwidth density, low power consumption, high integration, low latency, small size, and scalability through semiconductor manufacturing technology. Many analysts believe that this technology is key to solving the high-speed data transmission in the age of AI. Recently, Morgan Stanley also released an in-depth report analyzing the CPO industry chain. The institution stated in the report: Although Co-Packaged Optics (Co-Packaged Optics) technology is still in the early stages of market awareness... investors generally agree that this is the future direction of networking technology. The report predicts that with the mass production of NVIDIA's Rubin server rack system starting in 2026, the CPO market size will expand at a compound annual growth rate of 172% from 2023 to 2030, reaching $9.3 billion in 2030. In an optimistic scenario, the compound annual growth rate could reach 210%, with the market size surpassing $23 billion. In terms of industrial chain layout, FOCI has secured the position of the first-phase sole FAU supplier, AllRing is expected to supply key optical coupling equipment in 2026, and NanYa Plastics has been visited by NVIDIA's CEO and is expected to become a core partner in Rubin CPO system-level packaging. As for the next catalyst for the CPO supply chain, Morgan Stanley mentioned in the research report that NVIDIA may showcase some CPO prototype solutions at this year's GTC conference, but it is more likely that the Quantum CPO switch, rather than a product related to Rubin, will be mass produced in the second half of 2025. It is worth noting that regarding the realization of CPO, NVIDIA CEO Huang Renxun mentioned in a recent interview with the media that the progress of the key silicon photonics technology developed jointly with TSMC: Silicon photonics may still take a few years, and copper technology is still being used. 1. Core enterprise analysis in the industrial chain In the CPO industrial chain, Morgan Stanley focuses on core enterprises such as FOCI, AllRing, TSMC, and ASE. First, FOCI has unique advantages in the field of Fiber Array Units (FAU). Morgan Stanley believes that as the sole FAU supplier in the first phase, FOCI occupies a key position in the industrial chain due to its close cooperation with TSMC and excellent product quality. In the equipment supply sector, AllRing will provide optical coupling equipment to FAU customers. The business is expected to significantly contribute to AllRing's income starting in the first half of 2026, with the average selling price (ASP) and gross margin of its products expected to be significantly higher than the existing CoWoS product line. In the packaging field, Morgan Stanley mentioned the recent progress of ASE. NVIDIA's CEO recently visited ASE's factory in Taichung, Taiwan, indicating that ASE is likely to become a key partner in the production of NVIDIA's Rubin CPO SiP (System In Package). The new factory is expected to become a major production base for CPO SiP in 2026. Furthermore, Morgan Stanley's judgment is corroborated by TSMC's latest conference call. As a key manufacturing partner in the industrial chain, TSMC stated in its latest financial results conference call that CPO is expected to start volume production in 1-1.5 years. 2. Market size and development expectations Morgan Stanley proposes three scenarios for the CPO market: Baseline scenario: Compound annual growth rate from 2023-2030 is 172%, reaching a market size of $9.3 billion in 2030 Rubin GPU shipments forecast: 200,000 units in 2026, 700,000 units in 2027 NVIDIA will introduce the CPO architecture in the Rubin GPU rack system in 2026 Companies like Broadcom, Cisco, and Marvell will gradually start shipments in 2027 Note: CPO solutions mainly target the Rubin server rack system, and the traditional HGX system will not adopt this solution Optimistic scenario: Compound annual growth rate from 2023-2030 is 210%, reaching a market size of $23 billion in 2030 Rubin GPU shipments forecast: 500,000 units in 2026, 1.75 million units in 2027 Significant improvement in CPO yield rate More chip manufacturers actively adopting CPO solutions Conservative scenario: Compound annual growth rate from 2023-2030 is 107% Shipping delays due to yield issues Reduced willingness of customers to adopt Additionally, considering the complexity of CPO technology, the institution also does not rule out the risk of product delays. Furthermore, cloud service providers may delay the adoption of CPO due to cost and yield considerations, which could lead to a stagnant adoption rate of CPO. This article is reprinted from "Wall Street Seen", author: Gao Zhimou; GMTEight editor: Liu Xuan.